Most risk leaders (80%) are concerned about their organisation’s capability to respond adequately to risks that might emerge in the next decade, as only two in ten (20%) believe in their companies’ resilience, a recent WTW survey has revealed.
Moreover, only one in two respondents (50%) are confident their organisation’s approach enables it to respond to today’s risk environment, according to the survey.
The Emerging and Interconnected Risks Survey report assesses the key emerging risks identified by 333 respondents from 55 countries and proposes practical recommendations for organisations, considering improving their understanding of emerging risks.
Collectively, the organisations surveyed employ around 1.3 million people and generate US$2.3 trillion in revenue. Senior leaders, their supporting teams, and wider employees were consulted. Respondents come from 14 industries, notably transportation, finance, and natural resources.
The survey, designed by the WTW Research Network, guided respondents through four lenses of risk thinking using a new taxonomy of 48 risks across eighth categories.
Respondents assessed the impact of the risk of today, current emerging risks; tomorrow, those risks that will emerge over the next two years; and future, those risks that will emerge over the next ten years.
Adam Garrard, global chairman, risk and broking, WTW, commented: “The ability to effectively manage risk is key to thriving in an uncertain world. With regulators globally deepening their own exploration into emerging risks, investors asking more and more questions, and organisations facing material financial consequences as risks evolve, there is a need for new approaches.
“We need more than data-informed decision making to explore the emerging risks shaping risk and opportunity. We need to focus on optimising risk outcomes. Smart specialisation, smart service, smart use of data, smart research. It all comes together to help navigate the complex risk landscape.”
Technology led emerging risks, with artificial intelligence, cyber risks, and the future of technology among top concerns of today and tomorrow. Technology was also named as the greatest expected driver of change in the next decade.
Geopolitical issues were also key, being a top concern for today and tomorrow. Organizations highlighted a wide range of emerging risks fostering volatility, from elections to societal cohesion to the misalignment between government and business interests.
Climate change, environmental degradation, and policy needs dominated the long-term risk outlook. Organizations expect more frequent catastrophic events with uncertain future implications.
Continued amplification and acceleration of environmental risks, especially climate change and transition risks, are expected to be key sources of change in the next ten years, according to the survey.
The survey also revealed that nearly half (47%) of respondents anticipated climate change and climate transition risks as significant drivers of change.
Discussions around environmental degradation, the need of policy change to address future heat risks, the emergence of tipping points, energy demands, and regulatory frameworks were featuring concerns beyond physical risk events.
Organizations anticipate more frequent catastrophic events and are uncertain about the future.
When it comes to actionable insights, 40% of respondents in the wider colleague sample say that they have never been asked to feed into their organisation’s emerging risks evaluation.
One in two respondents (49%) was unable to specify the emerging risks that most concerns their organisation, despite the majority being able to identify the top five changes they expect to see over the next two (95%) and 10 years (90%).
This suggests that the potential exists for improving internal intelligence processes by implementing structured approaches, WTW’s report highlights. Action is required to integrate fragmented risk intelligence pockets within the organisation and guarantee a coordinated strategy across all departments.
Scenarios were seen as valuable tools (43%) for organisations to communicate their message and identify the most appropriate strategy.
Lucy Stanbrough, head of emerging risks, WTW Research Network said: “We are witnessing a continual evolution of threats, which means we need a smarter way to think about emerging risks. Every single risk in our survey was someone’s top risk, which shows there’s a real need for enhanced understanding a wide range of interconnected risks.
“Organisations recognise that they are not managing emerging risks as well as they wish they were at the moment, and are focused on changing that. When we look at the actions that organisations are looking to take in the next two years, putting an emerging risk a framework in place was top of the list. Ensuring that framework is part of the business model cannot be emphasised enough. Organisations that manage to do this successfully and find the opportunities among relentless change, will prove to be more resilient and performant.”
